Pension schemes adopt newly launched Net Zero Investment Framework

The Institutional Investors Group on Climate Change (IIGCC) has launched its new Net Zero Investment Framework, with several pensions schemes in the UK adopting the framework and committing to net zero by 2050.

The framework aims to help investors achieve net-zero carbon emissions through developing an investment strategy built around the framework.

A total of 36 investors managing $8.5trn (£6.12trn) in assets are already putting the framework to practical use, including Scottish Widows, the Environment Agency Pension Fund, Royal London, National Grid UK Pension Scheme, the Church of England Pensions Board, Brunel Pension Partnership, Northern Local Government Pension Scheme, Lloyds Banking Group Pensions Trustees Limited and Nest.

The majority of early adopters participated in the creation of the framework, which aims to help deliver on the goal of the Paris Agreement to keep global warming below 1.5 degrees.

It has five ‘core’ components: objectives and targets, strategic asset allocation, asset class alignment, policy advocacy, and investor engagement activity and governance.

The ‘net zero investment strategy’ is underpinned by three target types as the main metrics to measure action: portfolio level targets for decarbonisation and investment in climate solutions, timebound portfolio coverage targets for companies and assets to meet net zero or aligned criteria, and engagement coverage threshold ensuring intensive engagement to drive the transition.

Commenting on the launch of the framework, Pensions Minister, Guy Opperman, said: “Bringing climate change to the top of the agenda and ensuring that Britain’s pension investments act on managing climate change risk will not only help the UK reach net zero, but ensure a brighter future for all.

“In the run-up to COP26, more countries than ever are signing up for net zero. This creates huge opportunities, but also risks, for institutional investors such as pension schemes. That is why we’re the first major economy to legislate to require pension schemes to set targets to manage their own climate risks.

“I therefore welcome both the ambition and hugely practical guidance contained in this framework, which will help even more institutional investors aim for net zero.”

IIGCC CEO, Stephanie Pfeifer, added: “The global investment community has been called on to play its part in the transition to net zero – and it is answering that call.

“This new swathe of net-zero commitments from asset owners demonstrates the growing determination from investors to make important decisions to support a net zero and resilient future.

“Commitments are vital, but only meaningful for the long-term when realised. The net-zero transition itself requires an ongoing transition from making commitments to delivering impact. The Net Zero Investment Framework, developed with and for investors, is a blueprint for action that will enable and support investors in reaching these goals.”

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